Ask the Mortgage Experts

Builder's Deposit

My partner and I have found a brand new house we love at £126,000. The builders are offering 5% deposit and we have £10,000 ourselves. Will we get a mortgage with a decent rate using these figures? I earn 34k and my partner earns 18.5k but its the LTV we are worried about?

Elaine,

Your combined deposit amounts to just under 13% of the purchase price which will be sufficient to find you a mortgage. The interest rate you can expect to pay will be somewhere between 5.38% - 7.09%. As you can see this is a wide variance and the actual rate will depend on whether you take a Fixed or Variable rate mortgage and the initial term of any special rate.

Not all Lenders a happy to accept a Builder's deposit for the simple reason that it is an indication that the properties may be over priced. It is quite a common occurrence that when the valuation is carried out on behalf of the Lender it comes back at a slightly lower figure and then all their lending calculations will be based on that. This can completely upset the choice of product and rate, sometimes even the availability of a mortgage at all.

However, I still think that you will have a choice of Lenders and their products, albeit a small one and I recommend that you speak to an independent mortgage broker about your circumstances and requirements. They will be able to give you the best rates available at the time and also an idea of how much those rates would come down if you could increase the deposit to 15%.

Answers provided in response to Ask the experts are based on the information provided and do not constitute advice under the Financial Services & Markets Act. They reflect the personal views of the authors and do not necessarily represent the views, positions, strategies or opinions of John Charcol. All comments are made in good faith, and John Charcol will not accept liability for them.

We recommend you seek professional advice with regard to any of these topics where appropriate.

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